3G technology -- who needs it?

The billions of dollars spent in Europe this past year on licenses for third generation (3G) mobile phones suggests that future users are in for a treat. Or are they? Some would-be customers are indifferent, unsure of what the technology can do for them -- and whether they really need it.

According to the vendors, everyone will benefit from the new technology -- both enterprises and consumers. However, not everyone will be able to use it, at least not in the beginning. In the U.K., Germany and France for instance, the first users will primarily be enterprise customers, analysts forecast. This will not be the case in, for example, Sweden, where the technology is expected to attract private consumers as well. The reason for this is that the operators have obtained their licenses in different ways.

"The first two years of operation, in countries where the prices are high, the vast majority of users will be business users," said Nigel Deighton, vice president of mobile business at consulting company Gartner Group Inc. and based in France.

In Germany and the U.K., getting access to a UMTS (universal mobile telecommunications system), or 3G, phones and network access will be expensive, and network services will be slow in arriving. That's why, in these countries, the customers will initially be enterprise customers, according to Deighton.

"In Sweden, the government gives the carriers two years to build the network," he said. "That was one of the conditions to get a license. In Germany, the carriers have until 2006 to build the network, which obviously is bad news for the users."

Operators in Sweden, and in some other countries, will be able to keep their prices down thanks to the government's handling of the licensing procedure, according to Deighton. In short, the government charges only an administrative fee for the licenses, followed by a percentage of the carriers' revenue each year. In the U.K. and Germany on the other hand, operators have had to pay a hefty fee up front to obtain their licenses. In the U.K. for example, the four license holders had to pay US$32 billion altogether. In Germany, the bill for the six awarded licenses totalled US$44.8 billion.

Despite all the cost and effort put in by the operators, the customers have yet to be convinced. At Unilever PLC, one of U.K.'s largest consumer goods companies, spokesman Trevor Gorin is not entirely sure 3G will be the answer to all his prayers.

"Our reservations would be first, that this technology may well arrive later, rather than sooner," Gorin said. "Second, that it might not have the capacity currently talked about, and third, that given the recent auctions, the cost might be prohibitive," he said.

However, Gorin has some hopes for what the technology can do for his company.

"We would expect the greater capacity to enable us to access more information and communicate more interactively, remotely," Gorin said. "We would also expect perhaps to be able to surf the Net in a much more meaningful way than is possible at present and be able to make better use of multimedia facilities than currently."

"This is, of course, assuming that the technology delivers the currently mooted bandwidth," he added.

Gartner Group's Deighton also has high hopes for the technology. As it opens the door to higher speed data services, it will be useful for customers -- as long as prices are reasonable, he said. One of the biggest advantages with the new technology is that people will be able to stay online for hours, as well as transfer big files on their mobile phones.

When this will happen is another story. Some operators, like Telia Mobile AB in Sweden, say the services won't be available to the public for years. Telia is only now rolling out its GPRS (General Packet Radio Service), which is, as the company says, the link that bridges the gap between the second generation mobile phone service, GSM (Global System for Mobile Communications), and the third, UMTS.

"UMTS will be ready by the end of this year, but not for the mass market. It will be fully built in 2004, and people will be able to use it then," said Telia Mobile spokeswoman Charlotte Züger.

Late though it may be, Züger is quick to point out the advantages to the customers, once they will be able to use the new services.

"The customers will have access to even larger bandwidth. They can use heavier services, look at pictures on their mobile phone, and perhaps take pictures with the phone."

Züger said it may also be possible for users to watch streaming video on their phone screens, but not in the "first phase."

She confirmed that special phones will be needed to use the service, and these will be delivered by the usual vendors, including Nokia Corp., L.M. Ericsson Telephone Co., Motorola Inc.

Züger explained how the technology works by using the current GPRS as an example.

"With GPRS you can be constantly online, because GPRS uses the frequency room (in the airwaves) much more efficiently, which means that you can be online all the time," she said. GPRS uses small time-slots in the frequency room efficiently so that more people can be online at the same time. Data and voice transmissions are sent in small packets, and several small packets can be sent at the same time.

"It is so much more efficient to do it this way, instead of using a whole channel," Züger said. "A channel is the room that is created on a frequency, and up until now, a user had to use up a whole channel to send and receive data. But with GPRS that's no longer necessary. This will affect the prices too."

Basically, UMTS will work the same way, but will give access to even higher bandwidth. With mobile GPRS, a customer has data transfer rates of about 115K bps (bits per second) available, and UMTS will, in theory, give access to 2M bps bandwidth. This is a theoretical maximum speed, for someone who is stationary; in reality the speed will vary depending on how many users are online at the same time, and how fast someone is moving while using the service.

Telia, in accordance with Deighton's predictions, expects its UMTS customers to be both private consumers and corporate customers.

"There will be different services for different needs," said Züger. "A private customer may mostly want to talk on the phone. An enterprise customer is more interested in being able to download and look at documents and files. There will be customer-adjusted rented lines just like we already have today. With GSM, we have different variations of rented lines for different target groups. "This all sounds good, but Deighton nevertheless cautions both users and operators. Although there may be nothing wrong with the technology, "the degree of interest will be related to perceived value, minus the inconvenience and the cost of the services," he said.

"The only way the operators will get return on their investments is by making the (3G) services easy to use, and making them support people's lifestyle," he said.

In the meantime, the future customers aren't too worried. If the technology can deliver what it promises, then they may be interested. But only if they don't have to wait too long, if the services are easy to use, and if the price is right.

Unilever, with dual headquarters in London and Rotterdam, the Netherlands, can be reached at +44-20-7822 5252, or at +31-10-217 4000. The company can be found on the Web at http://www.unilever.com/. Gartner Group, in Stamford, Connecticut, can be reached at +1-203-316-1111, or via the Web at http://www.gartner.com/. Telia, in Stockholm, can be reached at +46-8-713-10-00 or http://www.telia.com/.

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